June 5, 2002

It is taking a measured risk, being mature in an unstable world, and getting the most reasonable return out of your investment. It is no longer much of a game for amateurs, but it does have room for them. It shouldn't be thought of as sudden riches, rather a well-reasoned source of cash-flow and asset appreciation. Amateurs can't tell speculation from investment -- one makes money over the longer term, the other wrecks illusion.

After the great real estate boom, Wall Street began to recognize that its main product gives off a pungent odor; it finally began to recognize that real estate may be real. The roller coaster statistical whirl of stocks and bonds may illustrate how well stocks have performed in the past, besides causing more cardiac arrests than other forms of poison, but they have lost their main ingredients: trust and stability.

Real estate investment trusts (REITs), while judged by the Street referees (analysts) more severely than their main touts (stocks), offer studious investors opportunities in real estate that even the street may begin to respect. Public homebuilder stocks have also done very well as have the companies themselves. They are better managed, better led, more balanced and brilliant marketers. As the population disperses into more diverse geographies and finally explores the urban scene, real estate demand begins to form myriad new genres of ultra-sophisticated opportunities: residential, commercial, industrial, institutional, infrastructural and retail. School boards begin to consider better uses of surplus properties. If their political piques can be resolved, then real progress can be made.

Urban societies were conditioned to have low expectations about the revitalization of their cores, even as the real estate sector hit the stratosphere. Speaking of lost opportunities, the possibilities are almost unlimited and even the politicos register some recognition -- though red tape remains a plague.

I have heard "you can't do that" and "we can't do that" so many times it has formed mental scar tissue. So I decided I would become a teacher, mentor and activist in assisting these once-terrific neighborhoods regain their luster. After all, they have posterity too, so let's unleash imagination and the American ingenuity.

I am continually asked by investors, and their advisers, what constitutes a "safe" investment in real estate. This grows as their preoccupation with stocks shrinks. Of course, timing and what you pay for the asset make the difference in money-making possibilities, as well as luck; management of the asset; management of the partnership, REIT or fund; patience; upkeep; condition and evolution of specific marketplace; debt service; cash flow; insurance; liability; interest rates; and a couple of other key items on my checklist.

Irony comes into this scenario when something totally unexpected ruins a happy play, like when the Fed becomes frightened by inflation, or politics upset timing, or when chemistry among partners turns to acid. Otherwise, there are safe projections which can be made; you can even have some fun making money.

I love working with small urban communities as much as the most sophisticated and better-known building giants. My present preoccupation is the Bronze Triangle, which is preparing its first communitywide charrette for June 29. More on this later.

Goodkin is an international real estate adviser and strategist, and a housing analyst since 1956. He can be reached at sandy.goodkin@sddt.com.